Another Friday: More IRS Revelations

Shock of shocks, another Friday and we get more revelations on the IRS Scandal. Of course, if one believes the IRS and the Obama Administration, Lt. Frank Drebin had it right:

Let’s get to the updates:

First, the IRS announced that five of the 82 individuals being questions on the scandal had emails that disappeared. This included Judy Kindell, a former senior adviser to Lois Lerner.

Next, we discover that Lois Lerner’s Blackberry was wiped clean after the IRS was told that the emails were wanted.

Do you know Andrew Strelka–the Andrew Strelka who used to work for the Department of Justice? If you do, Jim Jordan, Congressman from Ohio, would like to hear from you. The DOJ refuses to assist Congressman Jordan and the House Oversight and Government Reform Committee in finding Mr. Strelka. Congressman Jordan gave the DOJ until Friday to send a forwarding address for Mr. Strelka.

Finally, Judicial Watch reports that the IRS had a ‘Secret Research Project’ for conservative donor lists. An excerpt:

Sure enough, these latest emails are treasure trove for truth-seekers about this Nixonian scandal. Contained in the newly released IRS documents is an email from Deputy Associate Chief Counsel Margo L. Stevens that was sent in response to a question from Lerner concerning attempts to return donor lists the IRS had inappropriately obtained. In Stevens’ May 21, 2012, email to Lerner, she wrote:

Lois, I wanted to get back with you with respect to your question whether TEGE [Tax Exempt & Government Entities] could return to those organizations from whom donor names were solicited in questionnaires following their submission of applications for recognition of their tax exempt status (under 501(c)(4)), now that TEGE has reviewed those files and determined that such information was not needed across-the-board and not used in making the agency’s determination on exempt status.

For those who want to say there’s nothing to see here, Lt. Drebin and the Obama Administration thank you. The rest of us owe a debt of gratitude to Judicial Watch; their lawsuit against the IRS has done more to get to the truth then the current Congressional investigations.

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Ohio Small Business Owners Get a Break

There’s a new tax deduction in Ohio that gives small business up to a 50% tax deduction on their state income taxes. This includes sole proprietorships, partnerships (and LLCs taxed as partnerships), and S-Corporations. The deduction is taken on Form IT SBD. The deduction is on up to a maximum of $250,000 in business income; this means you can have $125,000 for the maximum deduction. The deduction also can’t exceed a taxpayer’s Ohio Adjusted Gross Income.

More information is available from the Ohio Department of Taxation.

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$1.25 Billion Attracts Tesla to Nevada

As you likely heard, Tesla will be building its new “Gigafactory” at a site in Storey County near Reno in northern Nevada. What attracted Tesla to Reno? About $1.25 billion.

Tesla get a 100% sales tax abatement for 20 years (worth $725 million), a 10-year property tax abatement (worth $332 million), $75 million of transferable job credits ($12,500 on the first 6,000 jobs), a 10-year 100% abatement of Nevada’s modified business tax, $8 million of discounts on electricity, and $120 million of transferable tax credits. (The transferable tax credits can be sold by Tesla to other Nevada businesses.) Tesla is required to invest $3.5 billion in manufacturing and real property according to the Reno Gazette Journal.

While Tesla is a clear winner, and assuming that the economic development forecast comes true (a $100 billion economic impact over 20 years) so are Reno, Storey County, and Nevada, there are definite losers. Some of the Tesla tax breaks will be funded by eliminating other tax breaks:

– Insurance companies headquartered in Nevada will lose a tax break worth $25 million a year;
– The Nevada film credit is being cut from $80 million to $10 million; and
– The Tesla deal includes an express provision allowing Tesla to sell cars directly to consumers, bypassing automobile dealers.

The package, which Jon Ralston reported will be in five separate pieces of legislation, does have to pass the Nevada legislature. Governor Sandoval will be calling a special session of the legislature to start next Wednesday.

In the end, one must ask if the tax hit to Nevada is worth it. Of course, all those jobs are dangling like money to my state’s elected officials. One thing is quite certain: taxes matter, as always.

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IRS Won’t Say Why It Erased Lois Lerner’s Blackberry

Let’s assume you’re under a court order to find some emails. Your hard drive crashed, but you think that some of them are saved on your Blackberry. Would you:
(a) Try to find them on the Blackberry,
(b) Do nothing, or
(c) Erase the Blackberry.

If you’re the IRS, the answer is (c). After the IRS was on notice about the missing Lois Lerner emails the IRS then wiped clean Ms. Lerner’s Blackberry. The Washington Post notes,

In response to the judge’s order, a top IRS official said in a signed declaration that the agency has no record of attempting to recover data from the mobile device.

IRS attorney Thomas J. Kane said in a separate declaration that the agency “removed or wiped clean” information from the Blackberry in June 2012, shortly after congressional staffers questioned Lerner about the targeting allegations and in the same month that the IRS inspector general began examining the issue.

Kane offered no explanation for why the IRS “removed or wiped clean” the data, and the IRS did not respond to the same question when asked by The Washington Post on Wednesday.

As Reason.com stated,

There may be a reasonable explanation for all this. But if there is, the IRS has yet to provide it, and in fact has refused when asked to do so. Combined with all the other suspicious and convenient omissions, lapses, and losses related to this case, it does make one wonder if perhaps there isn’t a reasonable explanation to be offered.

There’s nothing to add to Reason’s conclusion.

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This Won’t Help Confidence in the IRS

From South Florida comes a story of one IRS employee who allegedly liked to help taxpayers…just in the wrong way. Charles Corbitt worked for the IRS in West Palm Beach, Florida. He was charged with wire fraud today and is looking at 20 years at ClubFed if found guilty. He’s accused of “helping” taxpayers prepare returns for 2009 through 2012 and making sure they included residential energy credits. There’s just one issue supposedly with those returns (I’m sure you’re ahead of me): Those taxpayers didn’t qualify for residential energy credits. Oops.

Mr. Corbitt allegedly took part of the refund as his fee for preparing the returns. His fee was based on the size of the refund (according to the indictment); that’s a violation of ethics rules. He also allegedly inflated other itemized deductions.

As I said in the headline, the IRS desperately needs some good news…but there hasn’t been much this year.

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Former US Attorney Forgets to File

Back in the 1970s, Lawrence Semenza was the US Attorney for Nevada. In a 2007 article in the Las Vegas Review-Journal, Mr. Semenza commented about how different the job was back then. After Jimmy Carter was elected President, Mr. Semenza was allowed to stay on the job until brothel owner Joe Conforte was sentenced for failure to pay payroll taxes–a case prosecuted directly by Mr. Semenza.

“It was a different era,” Semenza recalled. “U.S. attorneys, even assistant U.S. attorneys, knew they were never going to be there forever.”

One thing, though, hasn’t changed: Failing to file tax returns remains a crime. Mr. Semenza pleaded guilty last week to failing to file his corporate and personal tax returns from 2006 through 2010. He has already agreed to make restitution of $290,000 to the IRS. He’ll be sentenced in December.

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Do Call Us, We Won’t Call You

The IRS does not initiate collection activities by phone calls. If you owe money to the IRS, the first notice will always be a letter delivered by the Postal Service. Unfortunately, scammers are continuing to pray on people. The IRS issued this press release today:

Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls

WASHINGTON — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.

The IRS will never:
1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

For all the grief that the IRS has (rightly) gotten over the IRS Scandal, they deserve no grief from these scam artists. The tips the IRS gives are completely accurate. If you get a phone call from the IRS demanding money, call TIGTA and report all the details.

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Remember Those Missing IRS Emails? They Appear to Exist….

“There’s no such thing as Lois Lerner’s missing emails. It’s all been a big lie. They’ve been lying to the courts, to the American people, and to Contgess. It is really outrageous.” That’s Tom Filton, President of Judicial Watch:

The reason that the IRS allegedly hasn’t attempted to recover the missing emails? “It would be too difficult.”

Now, I do need to point out that all we have at this point is Mr. Filton’s stating that Department of Justice attorneys stated this (along with a statement released by Judicial Watch). It’s possible that this isn’t true. That said, it makes sense that there are backup systems in place. I backup information and I have nowhere near the critical needs of the government.

Assuming that what Mr. Filton stated is true, both Congress and the Courts have been lied to by the current IRS Commissioner John Koskinen and by various attorneys. This isn’t deceit, this isn’t misstatements; this is out-and-out lying. If I were a federal judge being told today that the emails exist (after telling you they didn’t) but it’s too hard to get them, I know what my reaction would be. I suspect most judges will have the same reaction.

The next court hearing involving this scandal should be mighty interesting….

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Tax Preparers Behaving Badly

There’s a common thread among these tax professionals: You’ll be getting a refund. That sounds good until you realize that you really shouldn’t have, and that you will likely get in trouble later.

Our first preparer might be saying, “Well, I did get two returns correct.” Unfortunately, the IRS and the US Department of Justice allege he get 74 others wrong. The DOJ asked a federal court to bar Ernice Joseph and his Miami tax preparation firms, Ebenezer Tax Services Inc and Primo Tax Service Inc, from preparing federal returns for others. Why? Here’s what the DOJ states:

The complaint alleges that Joseph and his businesses prepared returns that unlawfully claim the Earned Income Tax Credit by reporting fictitious businesses or business income on clients’ Schedule C – Profit or Loss From Business. Joseph and his businesses prepare returns that claim education and other credits to which the taxpayers are not entitled in order to overstate their refunds. According to the complaint, the Internal Revenue Service (IRS) examined 76 returns prepared by Joseph and/or Ebenezer Tax Services and found that 74 contained a deficiency. The complaint alleges that, altogether, Joseph and Ebenezer Tax Service’s activities may have caused more than $20 million in loss to the U.S. Treasury. In addition, the complaint alleges that the revenue lost from Primo Tax Service’s activities could exceed $25 million.

Our next preparer is one step further along than Mr. Joseph. William Naes of St. Charles, Missouri, was permanently barred from preparing returns for others. Why? Well, things were too good to be true:

The government alleged that Naes prepared returns that fraudulently claimed tax deductions for his customers, including bogus deductions for charitable contributions and unreimbursed employee business expenses. According to the complaint, Naes also fabricated business expenses on Schedules C-Profit or Loss From Business, concocted a fake business for at least one customer and failed to properly identify himself as the paid preparer on many of the returns he prepared.

Neither Mr. Joseph nor Mr. Naes appear to be under criminal indictment; our other two preparers weren’t so lucky. Julius Williams owned and ran his tax preparation business in College Park, Maryland. He catered to temporary workers from Jamaica. His clients got a great deal: Phony Schedule C businesses, phony deductions, phony Earned Income tax credits, and phony education credits led to real refunds. Mr. Williams did one nasty thing to those clients: He stole those ex-clients’ identities to help his current clients. After all, they were back in Jamaica, unlikely to file another US tax return, so why waste a good identity? Finally, Mr. Williams cheated on his own taxes. He pleaded guilty and must make restitution of $1 million; he’s also looking at a term at ClubFed.

Our final Bozo preparer is Daniel Jones of Fredericksburg, Virginia. Mr. Jones operated a business called Tax Doctor Plus. I use the past tense because Mr. Jones will be heading to ClubFed for the next 37 months. He did have a lot of satisfied clients: he used phony tax credits, phony Schedule C’s, phony Schedule A expenses, and phony W-2s to increase his clients’ refunds. He also falsely claimed to be a CPA.

Some common sense applies when you’re reviewing your tax return. First, always review it–don’t just sign it. And if it shows you worked at a business you didn’t or you have a credit for college education expenses when you attended college twenty years ago, there’s a problem. Remember, if it sounds too good to be true it probably is.

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Today, Liechtenstein; Tomorrow, the World!

Fellow Enrolled Agent Jason Dinesen calls EAs the Liechtenstein of the tax world. Personally, I think he may be overstating our case; when I tell people I’m an Enrolled Agent the most common reaction is, “You don’t look like you’re in law enforcement.” Sigh….

But kudos to the National Association of Enrolled Agents: The NAEA is doing some positive public relations. If you fly American Airlines in the coming months you will hear NAEA President Lonnie Gary explaining what an EA really is–America’s tax experts. Here’s a link to the video that will be running.

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